Fool's Eye View

[ May 9, 2000 ]

Baltimore Quarterly Results

By Nigel Roberts (TMFNigel)

Chippenham, Wiltshire -- It is nice holding shares in a company that is also listed in the USA: it means that we get regular updates on the progress, none of this waiting around for 6 months as we have to do with most UK companies, no, we get quarterly reporting. Hurrah, let's hope more companies start issuing full quarterly results.

So, here is a first glance impression of Baltimore Technologies' (LSE: BLM) Q1 results for the three months to the end of March 2000, written as a very interested shareholder! First reaction is that the results are pretty much in line with what we were all expecting.

Revenues -- £9.5 million up 100% compared to the same time last year.

The growth in software licensing sales was even more marked; at £5.2 million this represented an increase of over 800%. Licensing revenues now account for 55% of total revenue, although this was a small drop from the 58% recorded in Q4 1999. The company's strategy is to position itself as, essentially, an international PKI software supplier, rather than a security project engineering company.

Comparing Q1 1999 with Q1 2000 for a company growing as fast as Baltimore is not really a fair comparison: it is probably better to have a look at the growth on a quarter-by-quarter basis. Compared with Q4 1999 figures, sales increased by 33%.

Remember that this figure only includes a very small contribution from their CyberTrust acquisition, which was only completed on 28th March, and acquisition of a 72.5% stake in NSJ Corporation ion Japan, which was completed on 17th March. Results for the first quarter include only £400,000 of revenue from acquisitions. The full impact of the acquisitions will be seen in Q2, when total revenue is expected to jump to about £13 million.

One of the worries in the past has been Baltimore's lack of sales in the USA. However in Q1 sales in the USA increased by 180% compared to Q4 1999, and sales in the US represented 18% of total revenue. Remember, this is before any significant contribution from CyberTrust.

Stock split -- is expected to take effect on May 12th 2000

So on Friday, Fools who frequent the Baltimore discussion board can expect to be inundated with questions "why has the price of my Baltimore shares fallen by 90%?" In the UK the shares will be split in the ratio of 10:1. On Nasdaq, the American Depository Receipt (ADR) ratio will be changed from one share per ADR to two shares per ADR. This will result in an effective stock split of 10 for 1 on the London Stock Exchange and 5 for 1 on Nasdaq.

Losses increase to £7.2 million

Losses before tax in Q1 2000 increased to £7.24 million compared to £6.95 million in Q1 1999. A better comparison is with Q4 1999 where losses were £5.1 million. At this stage it is still very difficult to read a lot into the loss figures: Baltimore is effectively a "concept stock", we are told not to worry about "losses today" as they are "all part of the plan". The company is investing heavily in both sales and marketing as well as research and development in its aim for global domination -- or, at least, towards its objective of becoming the global leader in the provision of e-security infrastructure solutions. Investing in Baltimore is investing in a dream: losses today, jam tomorrow - at least that is what we all hope!

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